China's leaders supporting equity markets

Last Friday, the Politburo held a meeting chaired by President Xi. In a break from tradition, a statement was released mid-day, while the markets were still open, highlighting key points of the meeting. Its supportive tone sent the markets rallying. Who said China’s leaders don’t care about equity markets? There have now been two instances in 2022 where the government has added support to the market by calming nerves and reaffirming macro support, Vice-Premier Liu He’s speech on March 16th and the statement from the Politburo meeting on April 29th. The commonality of both dates was the Shanghai Composite’s testing of 3,000, which seems to be an important psychological support level. In addition to words, there have been supportive actions taken, including the cuts in the RRR, the regulatory approval of 45 new videogames (after a nine month pause), and some easing of property restrictions. However, China’s zero Covid policy has trumped these moves so far. In the Politburo statement, the government stuck to their ‘around 5.5%’ growth target for 2022, which seems increasingly challenging to meet. The hope is that China utilizes its full arsenal to kick start growth, including fiscal, monetary, and regulatory support. With the NBS manufacturing and non-manufacturing PMIs both showing continued weakness in April, we believe the government’s nuanced approach will shift into a more aggressive gear.